Basic Accounts Work (Level 2)

For 2012 entry (REGULAR) Students,

Level 2 Handout

Prepared by Mr. Abraham A.

Unit title:-Develop and Use a Savings Plan

Lo1. Discuss the place of saving and investing today

 Discuss The impact of increasingly high cost of living in society using
examples from the domestic environment
 Discuss Increasing levels of consumer debt in Ethiopia with reference to
relevant current issues
Consumer debt may refer to:
 credit card debt
 mobile telephone debt
 mortgages on residential and investment properties
 personal loans to purchase:
 motor vehicles
 travel
 domestic white goods
 store credit
 Student loans including the Higher Education Contribution
Scheme.
 analyze and discuss The importance of setting financial goals and
developing a saving and investment plan at different stages of an
individual's life
Financial goals may include:
 accumulating a set amount of money by a specified date in the
future for the purposes of:
 purchasing assets
 financing holidays, educational expenses, home renovations
and other known future expenses
 establishing a deposit for an investment such as a
unattainable
 stment property
 aiming to repay existing debts and be debt free
 establishing a regular savings plan
Basic Accounts Work (Level 2)

 Handling income and expenditure responsibly and avoiding

financial difficulties.
 Analyze and discuss Different attitudes to savings and investment and
explore the individual's own spending habits.
Attitudes to savings and investment differ and may encompass those who:
 believe it is essential in order to manage their money and
achieve future financial goals
 lack interest in or the discipline to save and therefore live
from one pay packet to the next
 Occasionally think about saving but who do not take active
steps to save.

Lo2.Understand risk as it relates to saving and investing

 Explain and demonstrate The concept of risk and risk versus return
Risk refers to:
The level of uncertainty associated with a particular savings or
investment product.
The concept of risk versus return refers to the general truth that:
 the higher the risk of the investment, the higher the expected return
 The lower the risk of the investment, the lower the expected return.
 Determine An individual's risk profile based on current and future
requirements and the individual's level of risk aversion
Risk profile refers to:
 The level of risk an individual is comfortable with when investing
the money.
 identify, assess and discuss The impact of inflation on the earnings
power of money
Inflation refers to:
 the cost of living, indicated by the inflation rate
 The percentage change in the Consumer Price Index which is a
quarterly survey of the retail price of a basket of goods and services
consumed by the general population.

Lo3.Develop your own savings plan

 Identify Personal savings goals and quantify in to dollar amounts and

arranged in order of priority
Goals need to be:
 specific
 measurable
 achievable
 realistic
 Timely.
 Develop A personal budget to reveal funds available to contribute
towards savings goals

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Basic Accounts Work (Level 2)

 Investigate The range of financial product options available to maximize

earnings on savings and the most appropriate is selected according to
own requirements
Product options may include:
 basic savings account
 cash management trusts
 fixed term deposits
 investments in debentures and secured and unsecured stock
 Online bank accounts offering higher rates of return.
Requirements to consider when selecting a financial product for savings or
investment may include:
 account keeping fees, ongoing fees and charges and other
non-government fees and charges
 additional services offered
 ease of access to funds
 level of risk involved
 locality of the institution
 minimum opening balance required
 potential tax implications
 rate of interest earned
 reputation of the financial institution
 Term to maturity.

Lo4.Implement your own savings plan

By:-
 Research The requirements to open an account and provide evidence of
personal identity and steps taken to gather the necessary documentation
The requirements to open an account include providing personal identification
from a range of sources which may comprise but not limited to:
 Kebele/woreda ID cards;
 Farmers associations’ ID cards;
 Employment and pension ID cards;
 School, college and university ID cards;
 Driver’s/operator’s licenses;
 Tax identification ID card;
 Passports;
 Work or residence permits; and
 Foreign-nationals-of-Ethiopian-origin ID card, together with a
valid passport.
 Ethiopian Community ID.
 Open Relevant savings accounts or other investigated financial products
and the savings plan implemented and monitored for a short period of time
 made Adjustments to the savings goal where it is realized that the goal is
unattainable

by Abreham .A Acc. Regular. Level-II

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